Wednesday, April 25, 2007

Hedge Funds and salaries

I was reading this interesting article on the New York Times on the ridiculous salaries some hedge-fund managers are pulling in. Check it out, the one guy they talk about made $1.7 billion.

That's $1,700,000,000.

That's 42.5 million dollars per paycheck if you're getting paid biweekly like most people.

What on earth do you do with that money?

So what exactly makes a hedge fund different than a mutual fund or any other investment device? Well, here is a good article to get you up to date if you're interested.

Basically, the difference is that hedge funds are only open to accredited investors (you need to have a lot of money) and you can short and long a stock, that is you can bet on it going up or down, which a lot of people (think of Overstock's CEO Patrick Byrne here) think is shady.

But ultimately, the thing that people have a problem with is the amount of money changing hands. That $1.7 billion is something we just can't understand—it leads many to believe something illegal is being done to earn that kind of dough.

As for the people who put their money into these funds, look at the returns some of these guys are getting on their money. They are obviously content in paying the high fees associated with hedge funds because they are getting a great return on their investment.

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